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GM to eliminate 1,100 U.S. dealers


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POSTED: Saturday, May 16, 2009

NEW YORK » General Motors told about 1,100 of its dealers—one in five—yesterday that they would be dropped by late next year, adding to the economic pain radiating from the beleaguered Detroit automakers to cities and towns across the country.

None of Hawaii's 25 GM dealers received such notification to the knowledge of Dave Rolf, executive director of the Hawaii Automobile Dealers Association.

GM's criteria for deciding which dealership contracts to end included dealerships selling fewer than 35 units annually.

“;I'm sure we don't have anybody in that category,”; Rolf said.

Including Chrysler's decision a day earlier to eliminate a quarter of its own, about 1,900 dealerships—many pillars of their communities and heavy advertisers for local media—learned in a matter of 48 hours that they would be forced either to sell fewer brands or close altogether.

The GM dealerships will be eliminated when their contracts end late next year.

“;We're 98 years old. We're two years from a hundred, and I don't want to go out at 99 years,”; said Alan Bigelow, whose family runs a Cleveland-area Chevrolet dealer that learned it was on GM's hit list.

While GM doesn't own the dealers, the company says its network is too big, causing dealers to compete with each other and giving shoppers too much leverage to talk down prices and hurt future sales.

Several hundred of the GM dealers knew already they were headed for closure, but most of them learned for the first time yesterday. The National Automobile Dealers Association, an industry group, says the GM and Chrysler cuts combined could wipe out 100,000 jobs.

Both GM and Chrysler are scrambling to reorganize and stay alive in a severe recession that has pummeled car and truck sales for U.S. automakers, which had already been losing market share to foreign companies for decades.

Chrysler LLC is already in bankruptcy protection, and industry analysts say General Motors Corp. is making its cuts now in preparation for a bankruptcy filing June 1. The company says it would prefer to restructure out of court.

GM declined to reveal which dealers will be eliminated. Many dealers vowed to fight, first through a 30-day company appeal process, then possibly in court.

GM's dealers are protected by state franchise laws, and the company concedes it would be easier to cut them if it were operating under federal bankruptcy protection. GM says it's trying to restructure outside of bankruptcy because of the stigma of Chapter 11.

Chrysler dealers have fewer options because the company has already filed for bankruptcy protection, and federal bankruptcy judges generally trump state law.